INSUBCONTINENT EXCLUSIVE:
The Golden Cross pattern formation in emerging market equities for the second time in the current year may help Indian equities to continue
A Golden Cross occurs when the short-term moving average crosses above the long-term average
It is perceived as a bullish technical pattern.
In the latest Golden Cross, the 50-day moving average of the MSCI EM Index has reached 1,038
compared with the 200-day moving average of 1,033, according to the Bloomberg data
In March, the EM index had gained nearly 6 per cent after forming a Golden Cross pattern before topping out
The Sensex and Nifty 50 too have reported the Golden Cross formation about a fortnight ago.
The sustainability of bullishness for the EM
index will depend on how tariff talks fructify between the US and China, and commentary from central banks in the developed markets on the
continuation of monetary stimulus.
Usually, an outperforming market tends to attract more allocation from active and passive funds
For the full year, local equities are still lagging by 3 per cent
Foreign portfolio investors (FPIs) have deployed $13.3 billion so far in 2019, the highest among the EMs, excluding China, and the largest
in last five years.
In addition, the percentage of Indian stocks trading above their 200-daily moving averages was 46 per cent, one of
lowest in the EM universe
RSI is a measure of magnitude of the recent price change
RSI of more than 70 is considered as overbought territory, while sub-30 is oversold
Currently, there are just four stocks in the Nifty 50 which trade above 70 RSI.
